Deregulation and other bollocks

The Big Picture is running a post thick on Irony. They list the rescue programs that seem to be multiplying like rabbits.

  1. Bear Stearns
  2. Economic Stimulus progam
  3. Housing Bailout Program
  4. Fannie & Freddie
  5. AIG
  6. No Short selling rules
  7. Fed liquidity programs (Term Lending facility, Term Auction facility)
  8. Money Market fund insurance program
  9. Special Loans for GM & Ford
  10. New RTC type program

which could easily run in the Trillion? Again this is manageable, after all the US has been running a war that cost about that much over 7 years.

A largely Republican congress has deregulated the financial industry, Clinton was president when Glass Steagal was repelled, in short the politicos have followed the lead of ideological special interest groups. The short lived experiment in deregulation ended in CATASTROPHY and is likely to go to the dust bin for a LONG time. The only thing that worries me right now is the knee jerk excess reactions that will go the other way and will be a pain in the butt (Sarbannes-Oxley anyone?)

Thank god, it is a Republican president that has enshrined socialism in the USSRA. It is a Republican president that has mortgaged my future by taking all the money he could from the coffers (money that isn't there really, this is all debt) trying to backstop the slide in housing.

And you know what? Paulson probably didn't have any other choice. Ideology was NOT a consideration. They are mortgaging our future so that our children can enjoy the USSRA as the bastion of freedom and semi-free capitalism.

If a Republican wins, they will have to pony up the money, either increase tax or print money or both. The war is expensive at this point. Reform my ass. I love it when ideological ignoramus get their arses handed to them by their own faction. It's beautiful. What a grand theft and ideological humiliation!!! Taxpayers picks up the tab of the excesses of the banks, those over-educated metro-sexual elites of the coastal towns. But whom am I kidding, everyone is partaking in the plundering. Joe "red-neck" Schmoe that "speculated" in the real estate market is going to get bailed out as well. And guys like me can sleep peacefully knowing that the markets are not going to crash overnight. (They will however go down). Thank you!

If a Democrat wins, communist theories be damned, the money they will raise from my taxes has ALREADY been pledged to Wall Street and Main Street housing. Ridiculous, and the best part is they have no choice. At best they can stop the war in Iraq and save about $200B a year?

He he, so for the next 4 month I can enjoy watching the daily show knowing that NOTHING that comes out of the mouths of politicos is truth. Hence my profound contempt and disgust for the profession. From the Republican meek, angry, bankrupt, hypocritical lies. If another Republican drools incoherently in my ear about free markets, I swear to god I will punch them in the balls. From the Democrats it is at least not hypocritical but it is just as corrupt, ineffective, empty, the current administration has sealed their fate economically. Hard not to be a cynic in politics.

Politics is opium for the masses and has been rendered inoperative from the inside by the economics. Only the "lender of last resort" and increasingly "buyer and holder of last resort" role of the USSRA is relevant. The rest is partisan noise that makes us fearful and hateful.

All hail the new world order! Long live the USSRA.

PEACE

Comments

Anonymous said…
My estimate on the RTC2 cost will be $2 trillion. We have something like $10 trillion of mortgages with a likely 30% total decline in house prices (from 2006 price base) nationwide (average...some a lot more like CA and FL, some less) by 2010-11. At least 2/3rds of that mortgage value will go underwater with most people walking who do go underwater.

We are appoaching the half way point for housing declines, but there is a lot more to go and the scariest part is that people that can pay the mortgage are figuring out they can walk away with little ramification except a credit hit - which will go away faster than 7 years because that's gotta be one of the bailouts in 2009 to stop housing prices from falling by 2010. All primary residence credit hits will be erased (this may be done implicitly not explicitly as banks scramble for buyers of the massive wave of forclosures yet to come).

I figure on 10 million to 20 million foreclosures in the years 2008-2012 inclusive.

Maybe Obama or McCain will give me some money in 2009 to keep me in my house :-) ...oops, damn, I'm rich, I make more than $50K! I get to PAY more.
adt43wt342 said…
hey pierre,

I think it would be the losses on the defaults that have to be calculated. Assuming 20% default (which would be high) this is a loss of 600B.

Of that money I am not sure who pays for the loss. Probably those who hold the paper which means everyone that bought MBS.

Getting out of your house and buying a new one, no matter how much moral hazard is involved will probably be widespread unless the govts renegociate the mortgages on a wide basis.
Anonymous said…
C'mon Marc, it's seriously overreacting to say we've turned in to USSRA. I few albeit major government regulations does not make the USSR make.
Anonymous said…
Are you trying to say that the USA is now like the former soviet union because of state ownership? That is a stretch. The difference is the USA is now forced into creating this new "trash bank" in order to prevent further economic collapse. This is a temporary measure that will last say ten years or so. It is a stretch to call this USSR style state ownership because a) it's just the sub-prime stuff (much less than 20%) and b) it's just a temporary trash bank.
Anonymous said…
15 million foreclosures * 133K average loss per foreclosure = $2 trillion.

Here is an extreme example (but these are popping up in parts of CA and FLA now).

“‘That can’t be Santa Cruz,’ said Hutchison. ‘It’s come down more than I would have expected. People have been saying coastal real estate would hold up better, but we’re seeing a decline that matches other areas.’”

“The flood of foreclosures is due to ‘very creative loans that should never have been allowed,’ said Scotts Valley real estate agent Nick Vrolyk. Vrolyk represented buyer and seller when a foreclosed Corralitos home sold in August. The home, purchased for $700,000, sold for $133,875.”

http://thehousingbubbleblog.com/?p=4948

and

Years Of Appreciation Have Been Wiped Out In California

http://thehousingbubbleblog.com/?p=4950
Jeremy Norris said…
Marc, I'd love to hear your thoughts on Carl Futia's comments here:

http://carlfutia.blogspot.com/2008/09/bailouts-and-ben-bernanke.html
Tango Juliet said…
A very nice (& sad) article: http://www.marketoracle.co.uk/Article6259.html
Daniel Brum said…
Another site with some great commentary:

http://globaleconomicanalysis.blogspot.com/2008/09/lies-from-paulson-keep-stacking-up-what.html
Juha Lindfors said…
One trillion < 10% GNP which as far as banking and financial crises go is still within the "normal" expense according to some IMF statistics I was looking at earlier.

Nevertheless, a mind-boggling number.

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